The Ministry of Food and Drug Safety released data on cosmetics production performance in 2019 in June. According to the data, the nation's cosmetics production exceeded 16 trillion won for the first time last year. However, the year-on-year growth rate was 4.9 percent, the second lowest in nearly a decade after 3.6 percent in 2017. The number of responsible vendors has increased by an average of 52.2 percent every year since 2012, but about half of them still have no production results. Statistics by type of cosmetics detected the strength of cleansing and tofu dyeing items. Except for some of the six items newly incorporated as functional cosmetics in 2017, their presence in production performance was minimal.
Register for sales, increasing steeply again
The number of cases increased 19 times from 829 in 2012 to 15,707 in 2019. In terms of the increase rate, the figure is 1,794.7 percent, which is the number of Korean cosmetics sales companies. The year when the growth rate was the highest during the period was 2013 (manufacturing and selling companies), which was 368.5% more than 2012. At that time, there are administrative factors, such as the change of the target of reporting production performance from manufacturers to manufacturing and sales companies, but it was the time when the "K-Beauty" craze was in full swing around the world. As the industry continues to see "export jackpot" cases, new businesses are literally flooding the market.
On the other hand, the year with the lowest growth rate was 2018. It was only 7.1 percent higher than the 2017, far below the average. It is believed to be due to the heightened sense of crisis in the cosmetics industry as China imposed a ban on Korean Wave in 2017. The craze for the start-up of cosmetics vendors, which seemed to subside, immediately reignited the following year. As of 2019, the number of registered cosmetics vendors rose 23.9 percent from the previous year, easily surpassing 15,000 units.
During the same period (2012-2019), the amount of cosmetics produced in Korea increased 128.3 percent from 7.122 trillion won to 16.2633 trillion won. The average annual growth rate is 12.5 percent, which is quite low, but far below the growth rate of the number of vendors. In fact, if the total amount of living performance is divided by the number of registered and responsible vendors, the amount will reach 8.592 billion won in 2012, but the amount has dropped to 1.035 billion won in 2019. Although participation in the market is increasing, the face of the market is becoming smaller and competition among companies has become fiercer.
52% of non-performing cosmetics responsible vendors
Although the company has registered as Marketing authorization holder of cosmetics, even those with no production performance have not reduced. As of 2019, only 7,580 out of 15,707 companies reported production results. The 8,127 companies, or 52 percent, had no history of producing products at all, which means that they had no money in sales of cosmetics. The ratio of such companies has been fluctuating at 51 percent in 2013, 44 percent in 2014, 40 percent in 2015, 51 percent in 2017 and 49 percent in 2018.
The number of cosmetics-producing items rose 2.4 percent annually from 101,296 in 2012 to 119,443 in 2019. However, in 2018 and 2019, the number of live items decreased continuously from the previous year. As the number of items decreases despite the medium price of production, the amount per item naturally increases. Production wages per item rose 15.8 percent year-on-year in 2018 and 9.4 percent in 2019, indicating that higher prices are underway.
Foundation coherence, color makeup ↓, dyeing↑
The proportion of each type based on production performance has not changed much over the years. Most types of production are increasing by the amount of total production. The composition of products for basic makeup, which is the dominant number, products for color makeup, products for hairstyles, and products for human cleansing, which are the second place, remains unchanged.
Products for basic make-up, which include major items such as cosmetics, cream, lotion, essence, oil, body products and cleansing products, saw their production increase 92.7 percent from 5.929 trillion won in 2014 to 9.8123 trillion won in 2019. The growth rate is slightly higher than the average, as overall cosmetics production increased 81.3 percent during the same period. In fact, the proportion of basic cosmetics products was overwhelming at 56.8 percent in 2014, but it rose further to 60.3 percent in 2019. In addition, products for body cleaning products, hair dye products, aroma products, and bath products have increased compared to five years ago (as of 2019). In particular, the production of hair dye products increased from only 20.5 billion won in 2014 to 292.9 billion won in 2019, with the growth rate reaching 1,328.8 percent. Its share of the total was also expanded from 0.2 percent to 1.8 percent.
On the other hand, the proportion of products for color makeup has decreased. In 2014, production amounted to 1.426 trillion won, but in 2019, production increased only 49.6 percent over the five-year period to 2.133 trillion won. Although it is still the second largest, its proportion has dropped from more than 15 percent until 2018 to 13.1 percent in 2019. As percentage of products for eye makeup is also decreasing continuously, it is likely to hand over the 5th place to products for hair dyeing. As of 2019, the proportion of production amount of two types is only 0,01%. It is estimated that the amount of production for infants and children and top products for hand and foot products in 2019 has decreased compared to 2014. The share of infant and child products suddenly began to decrease in production pay from 2018 and those for nails and toenails from 2016 has become even smaller.
The proportion of functional cosmetics based on production performance has been in the early and mid-30% range over the years. This is the case even though the range of functional cosmetics has increased from four items (including composite functionalities) to 10 items since 2017. In 2017, the first year of the scope expansion, the ratio rose to 35.9 percent as products licensed with existing medical products were converted into items, but it dropped to 32.1 percent in 2018 and remained flat at 32.8 percent in 2019. The figure is less than 35.9 percent in 2015 and 34.1 percent in 2-16, as the production volume of items newly included in functional cosmetics is so small.
In fact, the production amount of items certified for acne-prone skin-relieving functionality exceeded 10 billion won for the first time in 2019, and in the case of hair-removing items, only 2.6 billion won was produced in the same year. It is safe to say that there is no amount of production of atopic skin moisturizing and stretchy skin products. The total output of these four items does not exceed 0.1 percent of the province's total. This can be attributed to the fact that the price of fault for functionality is difficult or that companies believe that there is no marketability. On the other hand, products that have been certified for hair loss mitigation functionality continue to be released in the market and the amount of production increased every year to exceed 250 billion won in 2019.
Although size of production of multi-functional products is still the largest among functional cosmetics, its proportion is reduced. The portion, which peaked at 19.6 percent of the total cosmetics production in 2015, gradually fell to 13.8 percent in 2019. The proportion of whitening items was also reduced to 2.1 percent in 2019, although the proportion of whitening items was once over 4 percent. In contrast, the proportion of wrinkle-improving items rose to 7 to 8 percent in 2019 and surpassed 10 percent for the first time. The proportion of UV-blocking items has remained steady at the latter part of the 3 percent level.
The top tier is slightly lower, but the 'Big 2' system is solid.
If you look at the production performance of each responsible vendor, you can see the oligopoly structure of the domestic cosmetics industry. Although the number of companies reached 15,707 in 2019, the top 20 companies, which account for only 0.13%, accounted for 74.8% of the total production performance. However, the figure is steadily decreasing to 80.4 percent in 2015, 77.9 percent in 2016, 76.1 percent in 2017 and 75.5 percent in 2018. This means that as overseas markets expand, opportunities are also opening up for unknown brands and startups.
If you take a closer look, there is a clear gap even within the top ranks. The difference between LG Household & Health Care and Amore Pacific, the so-called "Big 2" and the rest, is enormous. "Big 2" accounts for 61.8 percent of the total in 2015, 61.1 percent in 2016, 59.6 percent in 2017, 58.4 percent in 2018 and 60.7 percent in 2019. As of 2019, only 2.3 percent of the third-largest Aekyung industry was accounted for, and less than 1 percent of the companies ranked in the top 10. It is not just an oligopoly system, but an industrial structure that is shaped like a big-headed tack.
In 2019, there were also notable changes between the Big Two. LG Household & Health Care, which had been in second place, ranked first for the first time ever, surpassing Amore Pacific's production pay. LNP Cosmetics and The Face Shop, which ranked 9th and 10th in 2018, were pushed out of the top 10 in 2019. On behalf of the two companies, Costory and Have&Be entered the top 10.
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